state tax

Minnesota State Tax Guide

State tax rates and rules for income, sales, property, fuel, cigarette, and other taxes that impact Minnesota residents.

Bottom Line

Middle-Class Families: Mixed Tax Picture (Go to the Kiplinger Tax Map for Middle-Class Families)
Retirees: Not Tax-Friendly (Go to the Kiplinger Tax Map for Retirees)

Minnesota's income tax rates start at 5.35%, which isn't a good sign for residents. Nevertheless, the income tax burden in the North Star state for most middle-income taxpayers is decidedly average. But seniors run the risk of having the state tax a part of their Social Security benefits and pensions.

Property tax rates are slightly above average in Minnesota. Sales tax rates in the state are higher than average, too. Plus, the state imposes an estate tax.

Minnesota Income Taxes

Minnesota Income Tax Range

Low: 5.35% (on less than $27,230 of taxable income for single filers and on less than $39,810 for joint filers)

High: 9.85% (on more than $166,040 of taxable income for single filers and on more than $276,200 for joint filers)

For 2022, the 5.35% rate will apply to the first $28,080 of taxable income for single filers and the first $41,050 of taxable income for joint filers. The 9.85% rate will apply to taxable income over $171,220 for singles and over $284,810 for married couples filing jointly.

Minnesota Taxation of Social Security Benefits

Social Security benefits are taxable in Minnesota, but for 2021 a married couple filing a joint return can deduct up to $5,290 of their federally taxable Social Security benefits from their state income ($5,450 for 2022). The 2021 tax break can be as much as $4,130 for single and head-of-household filers ($4,260 for 2022), and up to $2,645 for married taxpayers filing separate returns ($2,725 for 2022). The deduction is gradually phased out for married couples with provisional income from $80,270 to $106,720 ($82,770 to $110,020 for 2022). The phase-out range for single and head of household filers is $62,710 to $83,360 ($64,670 to $85,970 for 2022). For married taxpayers filing separate returns, the phase-out range is $40,135 to $53,360 ($41,385 to $55,010 for 2022).

Minnesota Tax Breaks for Other Retirement Income

Income from a military retirement plan is exempt. In the alternative, taxpayers with federal adjusted gross income of $37,500 or less who have a military pension can claim a credit of up to $750.

Taxpayers 65 and older can deduct up to $9,600 for single filers or $12,000 for joint filers. The deduction is phased out for taxpayers making more than $14,500 (single) or $18,000 (joint). Taxpayers making more than $33,700 (single) or $42,000 (joint) cannot claim the deduction.

Railroad Retirement benefits are also exempt.

Minnesota Sales Tax

6.875% state levy. Localities can add as much as 2%, with an average combined rate of 7.49%, according to the Tax Foundation.

  • Groceries: Exempt
  • Clothing: Exempt
  • Motor Vehicles: Exempt from ordinary sales tax, but taxable under special 6.5% excise tax ($10 for certain older vehicles; $150 for certain collector vehicles)
  • Prescription Drugs: Exempt

Minnesota Real Property Taxes

In Minnesota, the median property tax rate is $1,106 per $100,000 of assessed home value.

Minnesota Property Tax Breaks for Retirees

The Senior Citizen Property Tax Deferral Program allows people age 65 or older, whose household income is $60,000 or less, to defer a portion of the property tax on their home. The program limits the maximum amount of property tax that has to be paid to 3% of total household income; the state pays the rest, as a loan. Interest, at an annually adjusted rate not to exceed 5%, will be charged on this loan, and a lien is attached to the property.

Minnesota Motor Fuel Taxes

Gasoline: 30.6¢ per gallon.
Diesel: 30.6¢ per gallon.

Minnesota Sin Taxes

Cigarettes and little cigars: $3.703 per pack (excise tax plus special sales tax)
Premium cigars: the lesser of 95% of the wholesale price or $0.50 per cigar
Moist snuff: the greater of 95% of the wholesale price or $3.04 multiplied by the ounces and divided by 1.2
Other tobacco products: 95% of the wholesale price
Vapor products: 95% of wholesale price

Beer: $0.15 per gallon
Wine: $0.30 per gallon ($1.82 per gallon for sparkling)
Liquor: $5.03 per gallon
A 2.5% gross-receipts tax is also due on all alcohol purchases, in addition to sales tax.

Minnesota Estate and Inheritance Taxes

Minnesota's estate tax exemption is $3 million, but the state looks back to include any taxable gifts made within three years prior to death as part of your estate. Tax rates range from 13% to 16%.

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